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Community Development Publication

Affordable Rental Housing in Rural Texas

Needs and Solutions

Collaboration Models

In addition to the Greystone public/private model, other examples of collaboration to preserve critical rural rental housing can be found across the country, including Texas. Government entities, nonprofit organizations and for-profit companies can all play key roles—as can financial institutions through the Community Reinvestment Act (Box 2). Here’s a look at some of the models, by state.


The Dallas Fed teamed up with Enterprise Community Partners, the Texas State Affordable Housing Corporation (TSAHC), Motivation Education and Training (MET), and the Rural Rental Housing Association of Texas to launch the Rural Rental Housing Preservation Academy after learning about the maturing USDA RD mortgages while conducting research for its Community Outlook Series: Texas Affordable Housing Issue.

With the first session in January 2018, the five-session academy provided training and technical assistance for acquisition and preservation of USDA RD multifamily housing at no cost to interested participants. The nearly 70 registered participants were a mix of current owners of USDA projects, both for-profit and nonprofit firms, and those interested in acquiring a property to preserve affordability.

The intention of the academy was to provide training to anyone who wanted to maintain the properties’ affordability. Michael Wilt, external relations manager for TSAHC, a nonprofit that provides affordable housing opportunities to low-income and underserved populations, cited two examples of how the academy has already impacted the preservation effort.

In one case, a small-town housing authority had made the decision to sell its property, but after the representative began attending the academy, the housing authority made changes to preserve its units instead of selling them. In another example, an owner of multiple properties in several small towns in Texas had been planning to combine 55 properties into one portfolio. However, based on information gained from the academy, that group decided to reduce that number to 22 to make procurement of financing—and property preservation—more likely.

To create the academy, Enterprise received support from the Meadows Foundation. A key success factor has been developing partnerships with state and national USDA offices that participated in and presented at all academy the sessions.

Topics covered included technical aspects of the 515 program, such as USDA appraisals, capital needs assessments, and undergoing a transfer process. Sessions also covered financing and deal structuring, property management and resident services.

Susan Anderson, director of Enterprise’s Rural and Native American program, said the academy has benefited both participants and presenters, noting that “we’ve also seen a lot of interest from other regions and other states. The rural rental housing preservation academy model will be replicated in Colorado in 2020.” One surprising outcome was the level of interest from not only housing developers, but also industry practitioners—from financiers such as Fannie Mae and Freddie Mac to affordable housing accounting firms, citing the need to better understand the USDA program and portfolio to better serve their client. “They were interested in the level of information we’re providing on USDA Rural Development programs,” Anderson said. “They were interested in having a more in-depth understanding.”


Like Texas, Minnesota relies substantially on the Section 515 program to house low-income rural residents. In fact, the first property ever to use a Section 515 loan was developed in Grove City, Minnesota, in 1964.[19] Today, Minnesota ranks third, just after Texas, in terms of properties eligible for prepayment through 2050 with 223. Preservation, therefore, is critical to protect rural residents in the state.

Fortunately, a multisector collaborative effort exists. The Greater Minnesota Interagency Stabilization Group (ISG), created two decades ago, boasts membership from government and nonprofit housing entities including USDA RD, the U.S. Department of Housing and Urban Development, the Federal Home Loan Bank of Des Moines and the Minnesota chapter of the National Association of Housing and Redevelopment Officials.

The group meets every two months to discuss the current inventory of subsidized rural housing, including Section 515, and strategize about how to preserve properties. Oftentimes, a property owner or a funder approaches the group to solicit guidance in stabilizing units. ISG members vet the request to establish whether a property is a strong candidate—for instance, if it is “in a strong market with relatively high rents but receives rental assistance to help offset the amount a low-income tenant must pay.”[20] The ISG then will advise the owner or potential new buyer on funding options.

Part of the strength of this model is in the collaboration across housing agencies and organizations. In particular, members have successfully streamlined funding applications. In 1994, the ISG created a common “request for proposals” for developers to submit when applying for tax credits or other financing, which not only reduces time and red tape, but also requires that the funders prioritize collaboratively.

Finally, in instances where preservation does not work out, the group works with partners across the state to gather information on local resources that can help the tenants of the existing property. Resources such as Section 8, a voucher program that allows low-income families to pay for housing within their budgets, can provide tenants with alternative forms of affordable housing.


Indiana is first in the nation in terms of the number of properties eligible for prepayment with 253. The state has been proactive in tackling its expiring Section 515 mortgage problem. The Moving Forward initiative is a partnership between the Indiana Housing and Community Development Authority (IHCDA) and Energy Systems Network to provide energy-efficient housing for low-income families.[21]

For 2019, Moving Forward’s goal is to preserve at least 30 USDA RD properties that are at risk of losing affordability by 2020. To achieve this, the IHDCA is setting aside 10 percent of its annual rental housing tax credits for projects that advance its mission, regardless of other evaluation criteria.

Moving Forward selected three developers from a pool of applicants to attend a series of rural development workshops and connect them to potential financial resources to preserve Section 515 housing, including the set-aside credits. Each developer will create a plan to group at least 10 of the state’s 472 properties into one portfolio to manage.[22]

  1. “Key Housing Organizations Take Coordinated Approach to Preserving Rural Minnesota’s Affordable Rentals,” by Jacob Wascalus, Federal Reserve Bank of Minneapolis, Nov. 10, 2015,
  2. See note 19.
  3. Moving Forward Program, Indiana Housing and Community Development Authority, 2018,
  4. “Three Developers Selected to Participate in the Moving Forward Rural Development (RD) Program,” Indiana Housing and Community Development Authority, Aug. 16, 2018,
Box 2: How Banks May Contribute to Rural Rental Housing Under CRA

Banks in small towns and rural areas play an important role in the preservation of affordable rural rental housing. The Community Reinvestment Act (CRA) is a law intended to encourage banks to meet the credit needs of the communities they serve, including low- and moderate-income (LMI) areas, consistent with safe and sound banking operations. Bank compliance with the CRA includes activities in three categories: lending, investments and services, with the most weight given to lending.


Banks may make loans for the acquisition and rehabilitation of existing rural rental properties. These loans meet the required “community development (CD) purpose” for CRA eligibility because they provide housing for low- and moderate-income households. Opportunities to make loans with a CD purpose are typically few and far between in nonmetro areas, making these deals even more attractive to bankers.

An example of one such loan was provided by Home Bank to the Groesbeck Housing Authority. Groesbeck is a small Central Texas town with a population under 5,000. The bank provided rehablitation financing and, as a member of the Federal Home Loan Bank of Dallas, assisted the borrower in applying for grant funds needed to cover the gap between the tax credit proceeds and the equity available for rehabilitation of the units. The newly improved properties were not only safer and more energy efficient, but also an attractive addition to the community and boon to the local economy.


Banks may invest in low-income housing tax credits, which are CRA eligible and provide a return on investment. Grants to nonprofit organizations that provide housing and other services to LMI consumers are also considered CRA-eligible investments.

An example of one such contribution is the grant made by Capital One to Enterprise Community Partners for underwriting the capacity-building training and technical assistance provided through the Rural Rental Housing Preservation Academy project (see the academy section). Another example would be a bank making a donation to procure computers for a computer-learning center at a rental housing property.


Bank officials and staff may donate their time in service to nonprofit housing providers and their LMI residents. Examples of CRA-eligible services may include a bank officer providing financial expertise by serving on a nonprofit’s board of directors, a fundraising committee, or an advisory council charged with evaluating preservation options.

Other CRA-eligible services would be a bank sponsoring an application for a Federal Home Loan Bank Affordable Housing Program grant, as in the Groesbeck example, and bank staff members providing training workshops for rental-housing residents on topics such as budgeting, building credit and using basic banking services.

  • Andrew Dumont
    Senior Community Development Analyst, Federal Reserve Board of Governors
  • Emily Ryder Perlmeter
    Community Development Advisor, Federal Reserve Bank of Dallas
  • Julie Gunter
    Senior Community Development Advisor, Federal Reserve Bank of Dallas

The full report can be found at

The views expressed in this framework are the author’s and do not necessarily reflect official positions of the Federal Reserve Bank of Dallas or Federal Reserve System.